Sunday, December 02, 2012

In the Good Yglesias category, we have "the spice must flow" problem in that stopping the Keystone XL pipeline and other pipeline-fighting as led to a boom in shipping oil by rail. This correctly points the problem with a regulatory approach to carbon reduction - someone looks for a way around the regulation. OTOH, oil is not the same as Herbert's spice - it's a lot more price elastic in the long run, and anything running up the price will reduce the quantity purchased.

Regulation is an imperfect substitute for a carbon cap or carbon tax, but it's better than nothing.

For Bad Yglesisas, we have a cursory rejection of the idea that people making over $400,000 could have their entire income taxed at the highest rate instead of just the amount falling in the highest bracket. The flaw is a simplistic approach Yglesias takes - identify a problem and then pronounce the whole thing dead. Yes, as he describes, a ten-dollar increase in income could result in tens of thousands of dollars in additional taxes. He fails to take the next step to see if the problem has a solution. In this case, just alter the proposal so that the more a person's income exceeds $350,000, the larger the share of that person's income under $200,000 that gets taxed at the top rate. It satisfies the Republicans' inane criteria of not raising the top rate while getting more tax money out of the top earners. The solution isn't too difficult.

40 comments:

carrot eater
said...

no, that's good and good.

Not building some particular pipeline is a downright stupid way to manage carbon emissions. If you want to limit carbon emissions, put in a carbon price, pure and simple. Don't mess around with these indirect means like disrupting one means of transporting some fuel that is already being extracted.

Meanwhile, your fix on the tax scheme ends up outside the idea of 'tax all the income at the same rate', so maybe that's why it doesn't come up at a first reading of 'tax all the income at the same rate'. You're just suggesting a parallel marginal structure with different brackets. But anyway, see if you could work it out such that there wouldn't be discontinuities in the amount of tax owed, as you flip from one structure to the other.

It does amaze me how often you hear somebody who doesn't understand that not all of your income gets taxed at your highest bracket - not even close. Or maybe they do understand this, but they're just being dishonest when they publicly complain about the tax they pay.

Raise the rate to 100% on those that earn $250k or more a year and will be able to (barely) balance the Federal Budegt for one year which currently has a ~$1 trillion deficit. So what about the year after that?

It is a spending problem.

The current idea to return the rates on the $250k + earners to pre-Bush tax cuts will only add $80 billion in annual revenue.

You want to raise the rates? Fine but propose 10 times the amount in spending cuts so we can finally balance the budget.

$16 trillion and counting for debt. The interest rates will eventually rise and the interest payments on this debt will overwhelm the Federal Budget and negatively impact the economy..

"The current idea to return the rates on the $250k + earners to pre-Bush tax cuts will only add $80 billion in annual revenue."

Which is 50% of the 1.6T proposed by Obama over the next 10 years ($160 billion a year).

The argument that adding one piece of the revenue won't solve the problem, therefore we should not add that one piece of revenue, is stupid.

Pre-bush tax rates will be restored for lower income owners, too, the question is "when". One more year seems reasonable, give the economy time to continue recovering.

It is not a "spending problem". You can huff and puff that nonsense all you want, it's not going to fly.

The problem is that spending exceeds revenue.

There are an infinite number of different ways to solve that problem, ranging from 100% spending cuts to 100% raising revenue. Grownups understand that a viable solution will lie somewhere on the line connecting those two extremes.

You have the logic backwards, in a way I've never seen anybody go. Oil is not expensive because the US produces it. Rather, the US can produce a lot of oil because it is expensive. It'd be even more expensive if US production weren't so healthy.

"Additionally, the pipeline has many many other issues beyond its carbon footprint, like the possibility of localized environmental disaster."

There's lots of pipelines out there - that possibility isn't a good reason to single this one out for special treatment. Focus on pipeline safety regulation as a whole, if that's your concern. Or, if you are worried about the specific route of this pipeline in Nebraska, well, the company and the state are finally going to work on that (after the company insisted it wouldn't).

My point remains, that opposing Keystone XL at the State Dept level is a weirdly indirect and thus a poor way of addressing various concerns.

carrot eater - we live in an imperfect world. Forcing the oil to travel by rail is the functional equivalent to a tax.

I shied away from another argument in the OP but I'll put it here with just us folks listening - it's all about political signalling. Stopping Keystone pipeline would be a demonstration of political strength that could force industry to pay attention and seek accommodation. I'm not sure I totally believe it, but I think it could be a reasonable position.

If you stop Keystone XL, oil will still find its way to U.S markets even if it's not Canadian (or Bakken) oil. Rail. More imports of overseas oil. Increasing oil prices in the U.S. driving more tight oil development and more domestic oil production.

The demand is not going to go away.

It'd be a "feel good" executive intervention that would do nothing to drop GHG emissions overall.

You need a big P policy decision to drop demand (probably a carbon tax, fuel standards, and a mix thereof), and frankly, that's where all this activist energy should've been spent.

Yes, taxes on the middle class are going to have to be restored to earlier rates. There's no escaping it.

The country was doing just fine financially before the bush tax cuts were put into place. The country has done just fine in the past when capital gains were taxed as ordinary income (which is *not* the current proposal, capital gains will still be taxed at a lower rate than ordinary income if Obama gets his way).

Now, of course, what would be great would be to undo the last several decades of transferring the tax burden from business and higher income earners onto the backs of the lower and middle class wage earners. But I don't forsee that happening.

And, unfortunately, rather than forcing the necessary big P policy changes, the "stopping Keystone would accomplish nothing" argument will undoubtedly become the "excuse du jour" among Obama supporters once he gives the (public) OK to the northern part of the Keystone XL pipeline.

Carrot Eater,That would have been true when we took economics and OPEC was weak.

Now OPEC is strong, because the oil companies have consolidated and they want high oil prices.

Can you assure me that ExxonMobile no longer owns part of Aramco? Can you assure me that Halliburton executives no longer shuttle back and forth? Has Carlyle Group divested its energy holdings? My view is that all of these groups have an interest in keeping OPEC strong, encouraging the production of very expensive US oil, but not mentioning this little game by name.

"Drill, babe, drill!"

Just one other point. I promise everyone that proven reserves in OPEC countries are inflated. They do not have as much oil as they say they do, so they are very motivated to make as much money as possible on the oil that they do have.

Two-faced Obama heading America over the fiscal cliff on purpose for political motives.

July 2011 President Obama:

"What we’ve said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally while broadening the base."

President Obama December 2012 in reaction to the Republicans proposal to do the above but only at $800 billion.

"And unfortunately, the speaker’s proposal right now is still out of balance. You know, he talks, for example, about $800 billion worth of revenues, but he says he’s going to do that by lowering rates. And when you look at the math, it doesn’t work."

Matthew Yglesias graduated in philosophy, magna cum laude from Harvard College. He was an early supporter of the War in Iraq. Something about these two sentences doesn't fit: If Yglesias is so damn smart, why didn't he see through the pro-war propaganda blitz? Millions of people could see right through it.

But wait, there's more! Since he is a blogger, he in effect is part of the pro-war propaganda blitz.

"On the tax side, they agree to $800 billion in new revenue from "pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates." But they don't endorse specific loophole closures or propose a new rate structure."

2. The description of tax reform makes little sense. It's feasible to raise $800 billion from base broadening over ten years, but not to raise $800 billion and finance a significant cut in tax rates. Even if you capped all itemized deductions (including for charity) at $25,000, that would only generate about $1.3 trillion in new revenue, leaving $500 billion available to finance rate cuts.

At current rates, individual income tax can be expected to raise about $16 trillion over the next ten years. So, $500 billion in headroom would allow a roughly 3 percent (not 3 percentage points) reduction in tax rates; that is, the bottom rate could go from 10 percent to 9.7 percent, and the top rate from 35 percent to 33.95 percent.------------------

"What we’ve said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally while broadening the base."

Was he wrong then?

Funny how you are only critical of the evil Republicans. What a joke. Your integrity level is dopping into Mashey territory.

"What we’ve said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally while broadening the base."

Was he wrong then?"

Well, he was being naive, because he's asking the Republicans to make a proposal that would yield $1.2T in new revenue based on principles they claimed to support then just as they do now (no raise in rates, revenue increase by closing loopholes, etc).

He was being naive because he expected Republicans to do the grown-up thing and response positively to this expression of willingness to seek a bipartisan solution.

Now, of course, you're claiming that the statement expresses *his* proposed solution, which it clearly does not.

He's finally grown up and realizes that agreeing to consider Republican proposals just leads to Republicans moving the goal posts. I wish he'd understood that from late Jan 2009 rather than having taken two years to learn the lesson.

I see this Obama quote is making the rounds of conservative blogs, who seem to miss the fact that he's asking the Republicans to show how their approach will raise $1.2T rather than it being a proposal by Obama.

is clearly is a request for a proposal. The snippet doesn't say "who", but obviously, it's a request for a proposal from Republicans, and I'm sure if the full quote could be dug out, the antecedent would make clear who "who" is.

Obama cleary was referring to what he believed to be true. The only naive one is you.

Obama wants to go over the fiscal cliff unless he gets his new way (raising rates is the only way to raise revenue) for political reasons. He appreciates morons like you who carry his water and never critize or hold him to even a minor bit of honesty and consistency.

Hmm, August 2011 and December 2012. What happened during that time. No, wait, It'll come to me. Oh, yeah, an election, in which the American people very firmly rejected the Republican position and embraced the President's position.

So, Anon, do you bet the same way when you are holding a pair of deuces as you do when you are holding a full house?

Gee, anonoclown, when I play poker, it's all about raising revenue. Raising rates is all about raising revenue--and raising it from the right sources.

What we have is a difference of opinion among economists. Conservative economists say raising taxes decreases growth. They seem to be saying that high income individuals only work for remuneration and will slack off if they only get a lot more money rather than an obscene amount of money. Really, do you know anyone who is a professional who works only for a paycheck? Liberal economists say that taxing the highest income individuals will hurt the economy the least--and the data support them. But when were conservatives ever about evidence?

What we’ve said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally while broadening the base."

This is not a discussion about tax theory, it is about Obama playing politics when he refuses to negoiate on a point he proposed last year.

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Eli Rabett

Eli Rabett is a not quite failed professorial techno-bunny, a chair election from retirement, at a wanna be research university that has a lot to be proud of but has swallowed the Kool-Aid. The students are naive but great and the administrators vary day-to-day between homicidal and delusional. His colleagues are smart, but they have a curious inability to see the holes that they dig for themselves. Prof. Rabett is thankful that they occasionally heed his pointing out the implications of the various enthusiasms that rattle around the department and school. Ms. Rabett is thankful that Prof. Rabett occasionally heeds her pointing out that he is nuts.